Analysis: Tinkering at margins in growth bid

Finance secretary John Swinney. Picture: Neil Hanna
Finance secretary John Swinney. Picture: Neil Hanna
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THE penultimate pre-referendum Budget was always going to be of interest.

In seeking to secure greater consensus, the Cabinet Secretary offered some adjustments worth only £61 million from a total discretionary budget for 2013-14 of £28.6 billion.

Much-needed housing will now be secured through the addition of £10m to the affordable housing programme and £2m will be aimed at turning empty town-centre properties into homes. More energy efficiency and carbon reducing measures will be supported through an extra £28m. Of the remaining “giveaway”, £1m is provided to support the EDGE fund for entrepreneurs and £10m for trunk-road maintenance.

Whilst small in total, these measures support growth. But even this meagre reallocation has meant an effective budget cut for some. The main contributors are Scottish Water and the Renewables Fund.

Scotland’s colleges are relative winners. The Cabinet secretary allocated an “extra” £10m for 2013-14. Such an increase can be viewed as a win, but only in part as it will help to ameliorate the negative impact of the original cut in the colleges’ budget announced in September.

Scottish Water is now being asked to contribute £35m of its loan support to help fund these budget changes. This may add pressure on it to deliver greater efficiencies but if such are now possible, why is loan support being reduced rather than water user charges?

The reprofiling of the Renewables Fund released an extra £15m. A remaining £11m of the £61m “giveaway” has been made possible through Barnett consequentials arising from the UK government’s December 2012 Autumn Statement.

Securing a balanced budget in the face of UK fiscal consolidation and in the run-up to the referendum is challenging. Delivering a step change in sustainable growth will be even harder to deliver.

• Professor Jo Armstrong is an economist with Glasgow University’s Centre for Public Policy for the Regions.